China, Russia and the US set up a rival to big three ratings firms

The new credit agency, the Universal Credit Rating Group, has been set up a rival the existing agencies Moody's, S&P and Fitch. It will based in Hong Kong, and provide a check on the big three, whom some analysts say have contributed to the 2008 crisis.

Dagon, RusRating and America's Egan-Jones Ratings will have equal
shares in the venture, with an initial investment of $9 million.

The newcomer to the market is intended to provide some balance to
the so-called Big Three which have strongly dominated the
industry. Though rating agencies are a part and parcel of the
global financial system, they were little known before the
crisis. After the global turmoil broke out in 2008 Moody's,
S&P and Fitch were strongly criticized for over-estimating
complex mortgage-backed investments and thus persuading
investment in “bad assets” by those who initially didn’t want to
take up the risk. It became one of the key triggers to the
current economic crisis.

Ratings by the three global agencies have been used as guidelines
for investors in their decision making, as they indicate to
buyers of debt the probability of the debt being paid back.

Universal is to operate under a "dual-rating" system, which means
other local agencies would also be involved and issue their own
ratings. This will enable investors to "see there is a
difference of view and then the investors can make their own mind
up," CNN quotes Universal CEO Richard Hainsworth, who is also
president of RusRating.

Experts say the move is definitely in the right direction, but
it’ll take Universal time to win credibility.

“Anything to introduce greater competition … will encourage
everybody to have better discipline. But I think it will take
time for this new rating agency to establish itself,”
Avonechith Siackhachanh, senior advisor in the Asian Development
Bank's Office of Regional Economic Integration, told CNN.

Just a day before the deal Moody’s downgraded the Hong Kong
banking sector outlook to negative, referring to negative
interest rates and the chances of a Hong Kong property bubble.